The focus of the NPCA annual meeting underscores the emergence of the Internet as a pervasive force in the business world.

CHICAGO — Was this a convention of coatings industry representatives or a summit of technology titans?

What with all the talk of e-commerce initiatives, online marketplaces, B2B sites, and other, even more cyber-age sounding terms at the recent Annual Meeting of the National Paint & Coatings Association, one might have temporarily forgotten that making and selling coatings was the primary object of these programs.

But that may well have been the intended message — that the “Old Economy” business of manufacturing and the “New Economy” phenomenon of electronic commerce are no longer mutually exclusive endeavors. Indeed, the Old Economy has met the New Economy, and never will business be the same. Or, as one speaker at an Annual Meeting Forum session warned when discussing the Internet, “Don’t write it off as just a fad. It’s reality, here to stay.”

Information Age Evolving at Cyberspeed

Round One of this embrace with New-Age business concepts grabbed the stage early on at the NPCA Annual Meeting in Chicago. The award-winning author Stan Davis, the meeting’s keynote speaker, delivered the sobering news that the end of today’s “Information Age” economy can already be seen off in the distance of 20 to 30 years from now, when it will give way to the Biotechnology Age. And it was only, say, 50 years ago that the last vestiges of the Industrial Age faded into gray, nudged along by IBM, Microsoft and eventually this new toy called the Internet.

Davis said the power generated by the warp-speed advances in information technology will move from the center — the manufacturers, the suppliers, the companies, the mass media — to the periphery. In this late phase of the Information Economy, the user will wield the power, employing the tools supplied by technology to make decisions that will determine the winners and losers in this latter-day Information-Age world.

‘Renewable Advantage’ Seen as Key to Long-Term Success

Carrying the theme forward, business-strategy guru Jeffrey R. Williams cited the emergence of relatively obscure dot-coms and other technology newcomers as evidence that “nothing is forever” in the New Economy. General Motors and eBay with roughly equivalent market capitalization? That’s the verdict of the financial markets in the new “e-conomy,” Williams said.

In his discussion of “Renewable Advantage,” Williams categorized companies as being suppliers of products with short, medium and long life cycles in the commercial markets, and said companies must tailor their product-development, marketing and distribution strategies to reflect this reality. Products with a brief life of commercial viability must be brought to the market at the right time to maximize revenue and profits, then scrapped or reworked before the bottom falls out, he said.

Wall Street Rewards Companies Pursuing ‘Growth-Oriented Strategies’

Offering a different perspective — the view from Wall Street — financial analyst Frank Mitsch led off a ChemQuest Group panel review of the chemicals and coatings industries and their performance in the dog-eat-dog arena known as the financial markets.

Mitsch said the current “brutal market sentiment” afflicting the chemicals sector is the result of rising interest rates and raw-materials costs, and the battering being taken by the euro against other currencies. The financial markets are looking for growth, with cost-cutting strategies alone viewed as being insufficient to deliver the returns demanded by investors.

ChemQuest Group’s Susan Anderson and Mike Brown, focusing on business strategies in the current market climate, said companies can make a bid for the “growth, growth, growth” that “the Street is looking for” by pursuing “value extraction” through a number of strategies. These include restructuring; incremental technology and product-performance improvements; process enhancements, including those by customers; elimination of redundancies and inefficiencies; and pursuit of mergers and acquisitions to gain market share and scale.

Value “creation,” meanwhile, can be generated by entering new markets; synergistically combining product functionality; building alliances in the value chain; introducing technologies that enter the value chain; and pursuing mergers and acquisitions that result in technology innovation, new markets and new channels to market.

Smaller Companies Face Plenty of Challenges — and Opportunities

In a forum session geared to the small and mid-sized coatings manufacturer, Chuck Bangert of Orr & Boss provided a thought-provoking assessment of these companies’ prospects, as he shared the results of a recent company survey.

Despite a host of challenges that include limited growth prospects, increased competition, pressure on margins, environmental regulations, and shifting channels of distribution, Bangert said the survey results point to a number of opportunities. These include exploitation of small, specialized product niches; taking advantage of bigger competitors’ “loss of focus” in the wake of mergers and acquisitions; forging alliances with larger producers; and increasing penetration of an end-use segment or, in the case of architectural-coatings companies, geographic markets.

Other recommendations resulting from the survey cited the wisdom of focusing on core markets and seeking to recruit and retain top-notch employees who may suffer from “merger shock” caused by consolidation of the industry’s bigger players.

Bangert said the survey results suggest that the big coatings companies will look to cost-cutting as a way to boost profitability, while smaller companies are more likely to focus on product niches and customer service to push prices up.

Internet to Replace the Supply Chain with Supply ‘Network’

In a review of “The New Economics of Information,” Philip Evans of the Boston Consulting Group said the initial “Land Rush” phase of the Internet revolution has given way to a shakeout phase. In the longer term, success in the Internet era will depend on paying attention to the relatively conventional issues of competitive advantage, profits, customer relations, and other decidedly Old-Economy concerns.

Evans said the most dramatic impact of the Internet, however, is the “blowing up” of the traditional trade-off of marketing “reach” for “richness.” By way of explanation, he said that in the pre-Internet era, marketers faced a choice of employing media with “reach” — newspapers and television, for example — or techniques that provided “richness” — depth and customization of the information being communicated, as well as interactivity in the case of the personal “sales pitch.” The Internet, however, has the power to eliminate this trade-off, and thus will bring about a “seismic” shift in the world of business.

The radically altered marketplace spawned by the Internet will result in a “deconstructed value chain” in which Web “navigators” — information suppliers such as AOL, Bloomberg and Excite — will act as the new middlemen between suppliers and distribution outlets. The marketplace will evolve to a world “where there are no supply chains, but supply networks,” Evans said.

Challenge of Retaining Top Employees Reflects ‘New-Age’ Realities

Marshall Goldsmith, a management expert who focuses on the recruitment and retention of key personnel, said attracting and keeping “high-impact performers” has become much more complicated in the current business climate.

“Corporate loyalty as we know it is fading away, due to downsizing, restructuring, re-engineering,” Goldsmith said.

Working for a large corporation, once the primary objective of up-and-coming managers, has lost much of its appeal, while the status of working for a small company has gained favor, Goldsmith said. In this new era, top executives must employ a variety of techniques to retain top performers. Among the key points made by Goldsmith:

• Compensation should reflect the contribution of the employee, not just the employee’s length of service or job classification.

• The importance of “knowledge employees” is rising in importance and must be taken into account by executives.

• Company leaders should identify the employees they want to retain, and should let those employees know that their retention is important.

• Companies should provide recognition of top performers. Here, Goldsmith mentioned examples of major corporate CEOs personally contacting employees to thank them for their contributions and asking them for their views.

• Employees should be given entrepreneurial opportunities.

• It’s a good idea to “relax the culture.” If there is no reason to have a rule, then scrap it.

  The Annual Meeting program concluded with the final General Session and Luncheon, highlighted by an appearance by John Brandt, editor in chief of IndustryWeek magazine. Brandt offered a number of intriguing perspectives on “world-class manufacturing” in the New Economy.

The NPCA 2001 Annual Meeting is scheduled for October 21–23 at the Sheraton Seattle Hotel and Towers in Seattle

Sidebar: NPCA to Require Coatings Care Participation; Pollock, Doyle review Key Issues Facing Industry

CHICAGO – Membership in the National Paint & Coatings Association will require participation in the NPCA’s Coatings Care® health, safety and environmental program beginning Jan. 1, 2003, as a result of action taken at the association’s recent Annual Meeting. The requirement was approved in a vote of member-company representatives at the meeting.

In an address to company representatives at the meeting, NPCA Chairman E. Kears Pollock said 100% participation in Coatings Care “will be a clear statement that our industry is serious about its product-stewardship responsibilities and is focused on improving our health, safety and environmental performance.” But Pollock emphasized that companies will be allowed to implement the program according to their own resources and abilities, at a pace that fits individual company situations. Mandatory adoption of the program “is all about continuous improvement,” said Pollock, recently retired as executive vice president of PPG Industries Inc. The NPCA “is not going to become the Coatings Care police,” he added.

Pollock also reviewed a number of key issues facing the NPCA and the industry, including air-quality regulations affecting coatings manufacturers and users, childhood lead poisoning, and post-consumer paint management. He said the industry also faces a proposed national emission standard for hazardous air pollutants emitted during the manufacture of coatings and related products. That regulation is being billed as a “big-ticket item,” and could cost the industry an estimated $400 million to $500 million in add-on pollution-control systems, he said.

NPCA President J. Andrew Doyle, reviewing another major industry issue, said the association is carrying out an aggressive, multi-faceted defense against lawsuits seeking a financial windfall from the so-called “lead-paint industry.” Doyle said such lawsuits are being driven by “a combination of cynicism, politics and greed” on the part of plaintiffs’ attorneys “emboldened and enriched by their success in tobacco settlements”.

Doyle reviewed a series of steps the NPCA has taken to fight lead-paint litigation, including meetings with nearly all attorneys general of the states, who are often courted by plaintiffs’ lawyers to join in filing suits against industry. The association’s state-affairs program also has made certain that the industry is represented in key states and cities where interest in the lead issue is highest.

Doyle urged companies to support state paint councils in their efforts to distribute information, and to join the battle by “spreading the truth – that this industry has taken a constructive, proactive response to this issue from the very beginning.” He also called on companies to contribute to CLEARCorps, the Community Lead Education and Reduction Corps, a public-private partnership aimed at developing effective, feasible solutions to the lead-poisoning problem.

Sidebar: Gates Receives Heckel Prize; Industry Statesman, Achievement Award Winners Also Honored

CHICAGO – Allan W. Gates, the NPCA’s longtime chief financial officer and corporate secretary, received the association’s highest honor — the George Baugh Heckel Award — at the NPCA’s recent Annual Meeting.

Gates, affectionately known as “the little man with the big briefcase,” joined the association 45 years ago and has served four NPCA executive directors. He has held more titles and tackled more jobs than any association staff member, the association said. Gates recently announced that he will retire at the end of this year.

NPCA President J. Andrew Doyle praised Gates for “the patience, wisdom and generosity with which he has shared his knowledge of the association,” adding, “As he begins his well-deserved retirement at the end of this year, we will all miss him deeply.”

At the Annual Meeting Honors Luncheon, NPCA Chairman E. Kears Pollock and President J. Andrew Doyle also presented the association’s prestigious Industry Statesman award to six individuals. The award recognizes “long and devoted service to the paint and coatings industry.” Receiving the award were:

• Christian Bosset, Wattyl/U.S.;

• James F. Flynn, Union Carbide Corp.;

• Robert Hodgson, retired from Benjamin Moore & Co.’s Technical Coatings Co.;

• Franz Joseph Rankl, retired president of CEPE, the European association of Paint, Ink and Artists’ Colors manufacturers;

• Richard Roob, Benjamin Moore & Co.; and

• Sherwin L. “Bud” Steinberg, formerly president of Carboline Co.

  The NPCA also presented its Industry Achievement Award, given to recognize specific contributions to the coatings industry, to five individuals. They are:

• Roy L. Bever, Ashland Distribution Co., for his key role in addressing the mineral- spirits excise tax issue;

• John J. “Jack” Collins, retired from CREANOVA Inc., for his participation in the NPCA’s Industry Suppliers Committee;

• C. Daryl Johnson, PPG Industries Inc., for his work as chairman of the NPCA’s Safety and Loss Prevention Committee;

• Walter P. Miller, Union Carbide Corp., for his contributions to the NPCA’s Product Stewardship Committee and other association activities; and

• Bruce A. Zwicker, Millennium Inorganic Chemicals, for his leadership of the association’s Industry Suppliers Committee.